According to pricing data from the CME FedWatch Tool, market participants currently price a roughly 71% probability that the Federal Reserve will keep the federal funds rate unchanged within the 3.50%-3.75% range at the July policy meeting, alongside a 29% probability of an unexpected 25-basis-point rate hike. Compared with short-term interest rate adjustments, the market pays more attention to long-term policy expectations. Investors are now pricing a 75% chance of another 25-basis-point rate hike in September. Mounting expectations for future rate hikes have continuously pushed up expectations for U.S. real interest rates, exerting sustained valuation pressure on non-interest-bearing assets such as gold. Gold generates no interest income. When markets expect interest rates to stay elevated for a prolonged period or rise further, the opportunity cost of holding gold climbs continuously. A large amount of speculative capital keeps flowing out of gold ETFs and futures long positions and shifts toward interest-bearing assets including U.S. Treasury bonds and the U.S. dollar. This constitutes the core fundamental logic behind the recent sustained pressure on gold prices.

In terms of foreign exchange, the U.S. Dollar Index fluctuates sideways at high levels and currently trades steadily near 101.4, only slightly below the stage high of 101.80 set in late June. International gold is priced in U.S. dollars. Sustained U.S. dollar strength directly weighs on the dollar-denominated gold price. Meanwhile, it raises currency conversion costs for investors outside the United States purchasing gold, suppressing physical investment demand and retail buying interest in the over-the-counter market. A clear game pattern has formed in the market. If Federal Reserve Chair Walsh delivers strongly hawkish remarks during the press conference, the U.S. Dollar Index is likely to retest its recent high, amplifying downward pressure on gold. Should the wording soften the possibility of future rate hikes, the U.S. dollar will face room for a periodic correction, potentially triggering a technical recovery in gold prices. U.S. Treasury yields fluctuate repeatedly in tandem with policy expectations. The 10-year U.S. Treasury yield swings between 4.46% and 4.50%. Every rapid rally in yields triggers immediate downside pressure on gold, while pullbacks in yields bring short-term rebound momentum, resulting in wide-ranging volatility across precious metals throughout trading sessions.

Looking back at public statements from various Fed officials over the past two weeks, internal divisions over policy have continued to widen, further increasing difficulties for market forecasting. Hawks have repeatedly warned of risks of inflation rebounding, highlighting that oscillating international crude oil prices may push energy inflation higher again. Current overall inflation remains noticeably above the 2% long-term target, and the tightening cycle should not be terminated prematurely, leaving the option of additional rate hikes within the year on the table. Dovish officials hold different views. Signs of cooling in the U.S. labor market are gradually emerging. Persistently high interest rates will continuously increase corporate financing burdens and raise risks of a hard landing for the U.S. economy. They recommend maintaining interest rates at current levels for observation and relying on prevailing high rates to digest residual inflation pressures. Federal Reserve Chair Walsh has maintained his consistent communication strategy since taking office, refusing to provide fixed forward guidance on interest rates in advance. He has repeatedly emphasized that all policy adjustments will be fully based on real-time economic data rather than preset policy paths. This data-dependent policy framework makes it difficult for the market to predict policy turning points in advance and directly amplifies short-term volatility in gold, raising risks of rapid price reversals right after policy outcomes are released.

From a capital positioning perspective, notable shifts are taking place in the micro market structure. Holdings of the SPDR Gold Trust, the world’s largest gold ETF, have fluctuated recently without sustained large-scale buying or selling. Non-commercial long positions in COMEX gold futures have continued to decline modestly, while short positions have risen gradually. Speculative funds are actively reducing bullish risk exposure. Institutional investors generally adopt a light-position wait-and-see strategy, waiting for clear directional signals from the FOMC meeting before repositioning medium-to-long-term holdings. Multiple overseas investment banks have updated their latest assessments. They maintain a cautiously bearish outlook on gold prices in the short run, arguing that the Federal Reserve is likely to retain a cautiously hawkish tone, capping room for rebounds. Nevertheless, they stick to a bullish long-term view on gold. Persistent expansion of U.S. fiscal debt, restructuring of the global monetary system and ongoing de-dollarization trends will continuously boost long-term demand for gold as a value-preserving asset.

On the fundamental front, bullish and bearish forces in the gold market keep offsetting each other, preventing the formation of one-sided trends. Short-term bearish factors include mounting expectations for Fed tightening, high levels for the U.S. dollar and Treasury yields, and periodic easing of geopolitical conflicts in the Middle East that trigger a pullback in safe-haven buying. However, medium and long-term supporting factors remain solid. Geopolitical tensions across the Middle East have not been completely resolved. Conflicts between relevant parties could escalate again at any time, attracting safe-haven capital inflows into gold. Meanwhile, central banks worldwide keep pushing forward gold reserve purchase programs. Emerging market central banks continue allocating gold to diversify risks associated with U.S. dollar assets within foreign exchange reserves, consistently providing support for gold’s medium-to-long-term bottom. China’s central bank has maintained continuous gold purchases, with long-term strategic buying unaffected by short-term price swings.

On the trading chart, spot gold maintained weak performance during the Asian morning session, dipping as low as $4011 per ounce intraday and temporarily holding above the key psychological threshold of $4000. Market participants are focusing on three core signals. First, whether the text of the FOMC policy statement will upgrade wording regarding inflation risks. Second, remarks from Federal Reserve Chair Walsh at the press conference, specifically whether he explicitly leaves open the possibility of additional rate hikes in September. Third, updated economic projection dot plots, including whether the median interest rate forecast for the full year will be revised upward.

Three distinct scenario projections have been formed for this policy meeting. First, the hawkish scenario: the Fed keeps interest rates unchanged, yet speeches reinforce the message that interest rates will stay higher for longer and explicitly preserve the option of a September rate hike. Under this scenario, gold prices will likely break decisively below the $4000 support level and test the $3970-$3950 range. Second, the neutral scenario: interest rates remain unchanged, wording stays neutral, and future policy will fully depend on subsequent economic data. Intensified conflicts between bulls and bears will keep gold fluctuating violently within the $4000-$4070 range. Third, the dovish scenario: interest rates are held steady, while expectations for future rate hikes are softened and warnings over inflation risks are reduced. Gold prices may gain room for a rebound and target resistance between $4070 and $4100.

Special attention should be paid to risk factors. Before major interest rate decisions are announced, market liquidity often tightens periodically, accompanied by widening spreads and higher slippage risks. Once policy outcomes are officially released, gold is highly vulnerable to sharp one-sided rallies or slumps, intraday rapid reversals and gap volatility. Macroeconomic market expectations can shift instantly in response to speech content. Short-term trading requires strict position control and reasonable risk management. In addition, a series of U.S. economic data will be released overnight, and data prints will further amplify gold price volatility.

⚠️ The above content constitutes public market analysis only. Nothing herein shall be regarded as investment or trading advice. Precious metal, foreign exchange and futures trading carry substantial risks; please make decisions prudently.